Available, But Non-Drivable

Temporary Plate Saga Puts Brakes on Car Business

The growing economy of Ethiopia has been complemented with a ripening car sales business. But, as in any other sector in Ethiopia, selling cars is also full of challenges. One latest challenge related to temporary plates, however, is slowing putting the brakes on what was once a hopeful sector. The understanding about the rationale and benefit of the new approach of providing temporary plates vary between authorities and importers, reports FASIKA TADESSE, FORTUNE STAFF WRITER.

Since Mid-June the business reputation of most car importers and sellers frozen following the new directive issued by the Federal Transport Authority (FTA) which declares importers should only have a single number plate

Currently 412 importers receive a single plate from the Authority where as Buyers will receive temporary plates from Addis Abeba Transport Bureau’s 10 identified offices across the districts with a total quantity of 2100 plates

The number of new and used cars imported in 2010/11 was 21,412, up to 23,414 in 2011/12 and further to 30,128 in 2012/13. The report for the first half of the last fiscal was 17,749 vehicles according to a data obtained form Ethiopian Revenues & Customs Authority (ERCA) with major sources of China and Dubai.

Late on the morning of July 16, 2014, at the Abedella Seid Car Seller Plc, located around Enkualale Fabrica on Arbegnoche Street, Esmael Hassen, deputy general manger of the company, and two salespeople were idly standing at the door talking to each other, while a bank worker and his wife entered the compound.

It takes around 20 minutes for the couple to choose a silver colour Toyota Vitz car and make a price negotiation with one of the salesperson.

“Before we decide to buy the car, we should take it to the garage for technical assessment,” said the man to the salesperson.

The salesperson immediately called Esmail and told him the buyers want the car to be taken for technical assessment.

“We do not have an extra plate to give you now, so if you can bring a mechanic here for the assessment or leave your phone number and I will call you when the plate is returned,” said Esmail.

The couple agreed to come back another day and left the compound leaving their number with Abdella.

“Early in the morning, a certain buyer and our technician took a van to another garage with a plate for a mechanical test,” said Esmail.

Abedella Seid is one of the 412 vehicle importers in Addis Abeba registered at the Federal Transport Authority (FTA). Until recently, these importers used to get two to four temporary number plates from the Addis Abeba Transport Bureau.

By June, they were made to return the number plates because of a new directive the FTA issued. This proclamation had been neglected for the past nine years, until the FTA started complaining about the abuse of the plates by the importers.

The abuse, according to the FTA, included renting the number plates to others, transferring them to brokers who also import a few cars now and then as a side job. The new directive was issued to implement the proclamation and minimise these problems. The Authority stated that the temporary number plates could only be used to transfer the imported cars from the customs point to the importers warehouse. The buyers could then get their own temporary plates as soon as they present their purchase documents.

The car importers – according to the new directive, which has been issued for the implementation of the 2005 law – can only use the temporary plates they have been issued to move their vehicles from the customs to their warehouses, says Abeleneh Agedew corporate communications head at the FTA.

The FTA also issued two kinds of new plates – one with an AA code for Addis Abeba and another ET code for federal use.

Abdella had to return all three plates he had after getting a call from the FTA on June 19, 2014, and was then provided with one ET code number plate. According to the FTA, that number plate is enough for Abdella and others in the business to get all their newly imported cars to their warehouses or showrooms. Another change in the new practice is that only importers, not buyers, can get their temporary plates from the FTA and not from the regional transport bureaus, as had been the case. This has been fully in place as of this month.

The application of the law varies depending on the sales volume of each importer. The 412 importers have been categorised into four groups accordingly, with 143 of them falling under the group that imports 31 or more vehicles a year. This group gets one plate for a year, which will have to be renewed after that. The second group of 56 importers, with individual annual imports of 21 to 30 vehicles, get the plates for six months. The third group of 82 importers who import 11 to 20 vehicles and the last group who import 10 or less cars get one license renewable every three and one month, respectively.

These groups only include the used car importers. There are also those that import new cars. Some of the assembly taking place in Ethiopia includes MOENCO, Marathon Motors, Orbis, Nyala Motors, Lifan Motors and Ries General Trading. The new directive, while largely targeting the importers of used cars, applies to all equally, according to Abelneh.

The number of cars imported in to Ethiopia is growing annually. The number of new and used cars imported in 2010/11 was 21,412, up to 23,414 in 2011/12 and further to 30,128 in 2012/13. The report for the first half of the last fiscal year from the Ethiopian Revenues & Customs Authority (ERCA) indicated a total of 17,749 vehicles. The major sources are China and Dubai.

There are about 3,000 licensed vehicle importers in Ethiopia, only some of whom are involved in actual import activities. As part of the new directive, the FTA said that only those that have actually been importing vehicles will get their licenses, and only about 520 were able to come forward with documents proving that they have done so, according to an official.

“That means that 2,500 were using their licenses for other purposes,” he said.

The markup in the business is high and there are many who wish to profit from it. The markup from the sale of RAV-4 and D4D amounts to 240,000 Br and 120,000 Br, respectively. Average markups are 69,000 Br and 54,000 Br for Yaris and Vitz models, respectively.

A host of problems, including expanding corruption and criminal activities, were behind the change, says the official, who spoke on condition of anonymity. One problem was that employees of the Addis Abeba Transport Bureau had changed it into a business, issuing 15 to 20 temporary plates to an individual, he said. This had gone to such an extent that people who imported vehicles could not get temporary plates.

“Five hundred number plates have completely disappeared, with no record of who has taken them,” he added.

Those with excess number plates in their possession, he said, stood at the Kaliti branch of the ERCA renting temporary plates for at least 200 Br for one or two hours. Abelneh says that the rent fee could reach between 400 and 600 Br.

Normally, the use of the temporary plates is restricted, banned between 12 o’clock and 1 o’clock, as well as after 6pm. It is also not permitted to drive the vehicles out of town. But actually importers used those plates for vehicles they used personally, avoiding taxes that needed to be paid, for example, he says. And negligence in the implementation of the rules meant that those number plates were used for criminal activities during the night.

“Regular plates have individual details of the people owning them,” the official said.

That is not so for the temporary number plates, as there is no distinctive number or other identifying information on them.

One of the moves to address the problem has included taking the responsibility away from the Addis Abeba Transport Bureau, according to the official, and involving three technicians and the director of the vehicle technical assurance.

Both the importers and the people that buy from them get the new plates for a fixed fee of 250 Br, with buyers being allowed to keep it for only a few days until they get proper customs documentation and an inspection of the vehicle is completed.

An official at the FTA says that one plate is enough for the needs of the importers, although he admits that there has been no study to measure the impact, particularly when the vehicles are taken for inspection. The temporary plates are only intended to get the cars from the customs point to warehouses, if there are any, from the warehouse to the showrooms, from there to inspection and then for test drive. This official believes that the importers can use one temporary plates several times a day for various purposes.

The limitation of the plates issued to the importers to just one is affecting their businesses, as both used and new vehicle importers complain. One plate is not enough to serve all customers who need to test drive and take the cars for inspection, say various people in the business that Fortune talked to.

“It is the duty of traffic police to control the illegal use of the plates,” says the general manger of Sheger Car Sale, who has been in the business for nine years.

The new directive, he says, has reduced their sales from two cars a week to just one over the past month.

Yonas Car Sale has two sales points, one at Piazza and the other near Yohannes Church on Arbegnoch St. On Wednesdays morning, July 16, 2014, there were 15 cars, including Vitz and Yaris models, as well as vans and minibuses. Despite having two branches, the company has only one number plate now, according to Kinfe Dejene, owner of the company. The company is using that one plate at its Piazza branch, which is more popular.

“I tried to borrow from my friends, but they could not give me because they need the plate as well,” he added.

Abay Teshome has been in the business for three years, importing six cars a year, which he sells from a friend’s showroom. Now, he is out of business, he says, because without his own place he cannot get the plate, according to the new rule in place. Putting people like him, without their own addresses, out of business is, however, part of purpose of the new practice, according to what the officials are saying.

When buyers take the cars to mechanics in the company of the seller’s own mechanic, they are required to pay 500 Br for inspection. Now, the mechanics are likely to come more often to the sellers’ places for inspection, demanding double in pay, according to the sellers.

Importers of new vehicles do not share the inspection problem, as they handle it at their own facilities, but they are not without complaints. Nyala Motors SC imports 400 to 500 Nissan UD trucks and Eicher trucks a year, according to Mintesinot Teffera, marketing & sales director, all of which it has to handle with one plate.

“A single temporary plate affects our business activities,” he said. “This includes presenting our products at bazaars and festivals, moving the vehicles to where they will be weighed and delivering some of the vehicles to buyers outside Addis Abeba.”

The official, who spoke anonymously, admits that part of the problem is the cumbersome bureaucracy which takes long to process vehicle transactions, but argues that illegal activities had been so intense that the new change is generally good and necessary.

The transport authority is currently providing 442 plates that have an ET code and another 2100 plates with an A.A code. ET codes are provided to the importers directly by the federal authority and the remaining 2100 A.A code plates will be given only to buyers of cars by the Addis Abeba Transport Bureau until they finish the process of getting regular plates.

Buyers will receive temporary plates from 10 identified offices across the districts. Two hundred plates are assigned for nine districts and 300 plates for Bole District; this is managed by the Addis Abeba Transport Bureau.

From the total 519,816 registered vehicles in Ethiopia, 340,088, or 65.4pc of them, are registered and found in Addis Abeba. Addis Abeba issued 6,645 code 2 and 11,054 code 3 plates in 2012/13.

“It is strictly forbidden to drive vehicles from the place where they are sold for technical assessment,” said Abelneh. “Rather, the technician should make the inspection at the place where the vehicles are sold.”

It is risky to drive vehicles on the road before technical assessment has been done, he argues.

“No one buys a car without making a mechanical inspection by technicians, and every buyer prefers to take the vehicles to the place where the technicians are found,” said Kinfe.

He explains the reason why the buyers prefer to take the cars to where the technicians work is because bringing them to the place where the vehicles is sold costs double the price.

Normally, for a technical inspection of vehicles, the technicians demand 500 Br on average if the car is taken to their place, but they will ask up to 1000 Br if they are going to make the inspection at the place where the car is displayed.

The authority should really take this into consideration and should provide us with more than a single temporary plate, suggests Mintesinot.